1 .The Balance Sheet of Marjorie and Trimaine Charles enterprise at September 30 includes the following: (8...
Question:
1.The Balance Sheet of Marjorie and Trimaine Charles enterprise at September 30 includes the following: (8 points)
Cash | $60,000 debit. |
Accounts Receivable | $202,600 debit |
Inventory | $18,000 debit |
Allowance for Bad Debts | $4,400 credit |
Bank Loan | $60,000 credit |
Trimaine Charles has taken a business degree at Ryerson University and recognizes the importance of maintaining a minimum cash balance. As VP of finance, he has designated $50,000 as the enterprise minimum cash balance. The following information is also available: a. October and November sales are expected to be $560,000 and $672,000 respectively. All sales are credit sales. b. Cash collections in October is $450,200.
c. Cash disbursement in October is $290,000 d. Maximum $50,000 is allowed to repay if enough cash is available. e. other monthly expenses are $75,600, which includes $5,600 of depreciation. f. Interest can be ignored on the bank loan.
Requirement:Prepare the cash budget for October, taking into consideration any financing or investing.
2.Basket Company specializes in unique baskets. Peak sales for one of their products, the Easter basket, occur in March every year. The company has estimated the following sales for the first five months of the year for the Easter basket: (22 points)
Month | Expected sales in units |
January | 2,000 |
February | 3,000 |
March | 10,000 |
April | 1,000 |
May | 500 |
The baskets are considered deluxe as they are very intricate. As such, the company can sell the baskets for $30. Based on history, the company expects that 10% of sales are cash. Of the credit sales, half is collected on the month of sale and the remainder is collected in the following month of sale. Accounts receivable as at January 1st was $50,000; all of which is expected to be collected in January. Each basket requires 2 meters of plastic. The cost per meter is $2.00. The company wants to ensure it always has enough plastic on hand and therefore has indicated that ending inventory will be 10% of the following month's production needs for plastic. The company had 1,080 meters of plastic on hand as at January 1st. The company puts all purchases of plastic on account and pays for it the month following purchase. Purchases of plastic in December amounted to $2,000. Due to the intricate design, the company uses substantially all production line workers to create the baskets. Each basket takes 1.5 hours to produce and the direct labor rate per hour is $12.00. The company expects to incur $40,000 of operating expenses each month, this includes $5,000 of depreciation expense. The company plans to pay cash dividends of $3,000 in January. There is a minimum cash balance set by management of $5,000 at the end of each month. The company has access to a line of credit. Any borrowings and repayments must be made in multiples of $1,000. The company is subject to a 5% annual interest rate. For simplicity, assume interest is not compounded. Assume that borrowings are made at the beginning of the month and repayments are made at the end of the month. The company started the year with $10,000 in the bank.
Requirements:
- required a cash receipts budget for the first quarter of the year. (5 points)
- What is the account receivable balance as at March 31st?(1 point)
- required a production budget for the first four months of the year.(5 points)
- required direct materials budget for the first quarter of the year. (5 points)
- required cash disbursements budget for direct materials for the first quarter of the year. (5 points)
- What is the account payable balance as at March 31st?(1 point)
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer